March 8, 1990
CLA-2 CO:R:C:V 555484 LSCATEGORY:CLASSIFICATIONTARIFF NO.:9802.00.80
Mr. Lothar A. Bauerle, President
Kern-Liebers USA Inc.
1510 Albon Road
P.O. Box 396
Holland, Ohio 43528-0396RE: Applicability of partial duty exemption under subheading 9802.00.80, HTSUS, to spring assemblies
Dear Mr. Bauerle:
This is in response to your letters of August 23 and September 11, 1989, requesting a ruling on the applicability of subheading 9802.00.80, Harmonized Tariff Schedule of the United States (HTSUS), to spring assemblies to be imported from Mexico. Samples of the components and the spring assemblies were submitted for examination.FACTS:
The spring component of the spring assembly is manufactured in the U.S. from strip steel of U.S. origin and European Community (EC) origin. The manufacturing process consists of cutting the steel into strips, coiling the springs, and stress relieving the springs by heating them in an oven. In a conversation with an attorney on my staff, you stated that the process of manufacturing the springs is described in more detail in Headquarters Ruling Letter (HRL) 083313, dated April 13, 1989, which ruled on the country of origin of the same seat belt retractor springs for tariff purposes. In that ruling we stated that the springs are manufactured from coils of rolled steel by the following three-step process: (1) the coil is split into strips; (2) the strips are processed into springs by cutting them to length and coiling; and (3) the spring coils are heated to 230 degrees centigrade for 30 minutes.
Under the facts of the instant case, the springs are exported to Mexico where they are assembled by your
Mexican affiliate using two alternative processes. One process involves the assembly of the spring into a plastic spring housing which is of U.S. origin. The spring is then lubricated. The other process involves the assembly of the spring into a temporary wire retainer. This retainer, which is imported from West Germany, is a round piece of wire enclosed by twisting the ends. The temporary retainer is used to hold the wound-up spring until the spring is transferred permanently into another retainer. You advised by telephone that the spring assembly consisting of the spring and temporary wire retainer is imported into the U.S. and then shipped back to Mexico to your customers. These customers then transfer the spring into a permanent type of retainer. Both types of spring assemblies are for use in automotive seat belt retractor systems.ISSUE:
(1) Are the steel springs considered to be fabricated components of U.S. origin for purposes of subheading 9802.00.80, HTSUS?
(2) Do the operations performed in Mexico constitute an assembly process, thereby entitling the spring assemblies to the partial duty exemption under subheading 9802.00.80, HTSUS?LAW AND ANALYSIS:
Subheading 9802.00.80, HTSUS, provides a partial duty exemption for:
[a]rticles assembled abroad in whole or in part of fabricated components, the product of the United States, which (a) were exported in condition ready for assembly without further fabrication, (b) have not lost their physical identity in such articles by change in form, shape or otherwise, and (c) have not been advanced in value or improved in condition abroad except by being assembled and except by operations incidental to the assembly process such as cleaning, lubricating and painting.
All three requirements of subheading 9802.00.80, HTSUS, must be satisfied before a component may receive a duty allowance. An article entered under this subheading is subject to duty upon the full value of the imported assembled article less the cost or value of such U.S. components, upon compliance with the documentary requirements of section 10.24, Customs Regulations (19 CFR 10.24).
We must first determine whether the steel springs which are manufactured in the U.S. from U.S. and imported strip steel are "fabricated components, the product of the United States." Section 10.14(b), Customs Regulations (19 CFR 10.14(b)), provides in pertinent part:
Foreign-made articles or materials may become products of the United States if they undergo a process of manufacture in the United States which results in their substantial transformation. Substantial transformation occurs when, as a result of manufacturing processes, a new and different article emerges, having a distinctive name, character, or use, which is different from that originally possessed by the article or material before being subject to the manufacturing process.
In HRL 083313, we found that the processing of the same seat belt retractor springs from steel coils resulted in a new and different article which had a new name, character, and use. The springs were used specifically in automotive seat belt retractor assemblies, while the steel sheets in coil were unfit for that use. Although HRL 083313 involved the additional step of assembling the springs into plastic spring housings, the finding of substantial transformation also applied to the processing of the retractor springs before their assembly into the housings.
Applying HRL 083313 to the facts of this case, we find that the steel springs manufactured in the U.S. from U.S. and imported strip steel are fabricated components which are products of the U.S. because the imported steel undergoes a substantial transformation in the U.S.
For purposes of subheading 9802.00.80, HTSUS, the term "assembly" means the fitting or joining together of fabricated solid components. C.J. Tower & Sons of Buffalo, Inc. v. United States, 62 Cust. Ct. 643, C.D. 3840, 304 F. Supp. 1187 (1969). Force fitting is listed in section 10.16, Customs Regulations (19 CFR 10.16), as one of the acceptable means of assembly. The operation of force fitting the spring into the plastic housing in Mexico is an acceptable assembly operation which entitles both the spring and housing to a duty allowance under subheading 9802.00.80, HTSUS.
Section 10.16(b), Customs Regulations (19 CFR 10.16(b)), provides that an operation incidental to the assembly process, whether performed before, during, or after assembly, does not constitute further fabrication, and does not preclude the application of the exemption provided under subheading9802.00.80, HTSUS. Application of lubricants is listed in 19 CFR 10.16(b) as an example of an operation incidental to the assembly process. Therefore, the lubrication of the spring when it is assembled into the plastic housing is an acceptable incidental assembly operation.
The process of securely fitting the spring into the temporary wire retainer in Mexico is similar to a force fitting operation and, therefore, constitutes an acceptable assembly operation. The fact that the wire retainer serves as a temporary method of holding the spring in place until it is placed in a permanent retainer or housing does not disqualify the assembled article from the benefit of subheading 9802.00.80, HTSUS. In Mattel, Inc. v. United States, 67 CCPA 74, C.A.D. 1248, 624 F.2d 1076 (1980), rev'g, 82 Cust Ct. 234, C.D. 4805, 475 F. Supp. 683 (1979), phonograph records packaged in envelopes and stapled to talking toy phones had no use independent of the toy phones and were not meant to be permanently attached to them. The court held that the records were entitled to a duty allowance under item 807.00, Tariff Schedules of the United States (TSUS) (now subheading 9802.00.80, HTSUS) as U.S. components of articles assembled abroad.
We find that the U.S. fabricated components consisting of the steel springs and plastic housings are in a condition ready for assembly without further fabrication, do not lose their physical identities in the assembly operations, and are not otherwise advanced in value or improved in condition except by assembly operations and operations incidental thereto. Therefore, the spring assemblies imported into the U.S. are eligible for the partial duty exemption under subheading 9802.00.80, HTSUS.HOLDING:
The steel springs manufactured in the U.S. from U.S. and EC steel are fabricated components which are products of the U.S. because the EC steel undergoes a substantial transformation in the U.S. for purposes of subheading 9802.00.80, HTSUS. The operations of assembling the springs into the plastic spring housings and the temporary wire retainers are considered proper assembly operations. The lubrication of the springs is an operation incidental to the assembly process. Therefore, the imported spring assemblies may be entered under subheading 9802.00.80, HTSUS, with allowances in duty for the cost or value of the springs and the plastic spring housings, which are the U.S. components
incorporated therein. No allowance may be made under subheading 9802.00.80, HTSUS, for the cost or value of the wire retainer of West German origin.
Sincerely,
John Durant, Director